What will the RBA do next?

If you want know what the RBA is likely to do next, there is probably no better chart to look at than the yield curve of Australian Government Bonds. With the lowest point being around 2.75% at the 2 year maturity and the 15 year rate barely above 4%, clearly the market believes rates are going to stay much lower than the current 4.25% for a long time.

As for next steps, given a 1 year (which really matures mid September 2009 … just 8 months away) bond yield of just under 3%, the market expects the RBA to lower rates down to 2.75%, possibly lower, sometime over the next three to four months.